Increase in Probate fees: How will this affect you?

Following a consultation paper in February 2016, the Government announced on 24th February 2017 that they are planning to proceed with the proposed increase in Probate fees.

An overwhelming majority of respondents to the consultation (including ourselves) opposed the proposals but it seems likely that the Ministry of Justice will be pushing on regardless.

The proposed increase is being implemented to address the shortfall in income identified by the Ministry of Justice. In 2014/2015, the Court and tribunals administered by HMCTS cost £1.8 billion, but only £700 million was received in income. The proposed changes are expected to raise an additional £250 million a year and will supposedly make the Probate system fairer.

The current Probate fee for all estates above £5,000 is £155. If your estate is below £5,000 then there is no fee payable. The proposed changes, due to take effect in May, will see the Probate fee calculated upon the size of the estate. The proposed new fee structure is shown below:-

Value of estate Fee required
0-£50,000 Nil
£50,001-£300,000 £300
£300,001-£500,000 £1000
£500,001-£1,000,000 £4000
£1,000,001-£1,600,000 £8000
£1,600,001-£2,000,000 £12,000
£2,000,001 or more £20,000

Interestingly, there is no difference in the cost of processing a Probate application if an estate is worth £50,000 or £750,000, yet the fee charged will be £3,700 more. Furthermore, Probate Registries are currently self-funded. It is clear therefore that the increase will be subsidising civil claims, which, unlike probate fees, are voluntary.

The new fees will apply even if your estate passes to your spouse or to charities. Whilst the amount of Inheritance Tax your estate may have to pay can change depending on the beneficiaries of your estate, the new fees will be payable by all.

It is easy to foresee the problems that will arise from such an increase. People will try to ensure assets pass without the need for Probate by using inappropriate Trusts, or by transferring assets into joint names, which creates numerous risks.

A further problem is how the applicants will raise the fee required. The fee needs to be paid before the Grant of Probate will be issued. There is therefore now a burden on the Executors of the estate to raise the necessary funds, before they have access to the deceased’s assets. Certain banks and building societies will release the deceased’s funds in advance of the Grant of Probate being issued, in order to settle Inheritance Tax or funeral costs. It has been suggested in the consultation paper that such an agreement will also extend to the new Probate fees.

However, if the estate has insufficient cash assets, then the applicants will have to raise the funds themselves. This can put added pressure and stress on an Executor, as well as a significant financial burden, which although they will eventually be able to recoup from the estate, could take several months depending on the sale of the estate assets. There will also be a delay to the Probate process whilst the funds are arranged.

The proposals have recently attracted media attention, especially after the Chancellor’s budget speech last week. Conservative MP, Jacob Rees-Mogg, criticised the proposals in the House of Commons as a ‘stealth tax’ and the Society of Trust and Estate Practitioners (STEP) have condemned the sharp increase as a new tax on bereaved families.

Strangely, the Office of the Public Guardian, an agency of the Ministry of Justice, have announced that from 1st April 2017, the registration fee for a Lasting Power of Attorney will fall from £110 per document to £82.

Further information is expected shortly as the draft Statutory Instrument has now been published. In the meantime, if wish to make your objection to the proposals known, an online petition is currently gaining support which can be signed by clicking here.

If you would like discuss the issues raised in this article, or any other matters relating to Wills, Trusts and Probate, please contact Karen Woodison on 01494 478613 or email klw@blasermills.co.uk

BM Insight